Notice seeking clearance to acquire the shares (or assets) of PropertyNZ Limited - Trade Me Limited - Commerce Commission
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Public Version Trade Me Limited Notice seeking clearance to acquire the shares (or assets) of PropertyNZ Limited To: registrar@comcom.govt.nz
Public Version
Executive summary
Trade Me seeks Trade Me Limited (Trade Me) owns and operates the Trade Me online
clearance to marketplace and classified advertising platform (trademe.co.nz), including
acquire Property Trade Me Property.
NZ
Trade Me is seeking clearance to acquire 100% of the shares (or assets) of
PropertyNZ Limited (PropertyNZ). PropertyNZ owns and operates the
homes.co.nz website (Homes). (For ease of reference, Trade Me refers to
the Homes website and the PropertyNZ business as Homes in this
application.) Homes provides a free online property data and information
resource for consumers and sells digital advertising services to advertisers
wishing to market to Homes’ audience.
The acquisition will combine Trade Me Property and Homes under
Trade Me’s ownership, but will result in limited overlap. Trade Me and
Homes each have a different focus for their business, and the acquisition will
enable Trade Me to improve the product it can provide to consumers and
advertisers. Trade Me believes that this will enhance rather than lessen
competition in all relevant markets.
Trade Me Property The goal of platforms like Trade Me, Homes, and their respective
and Homes attract competitors is to provide an online product that will attract consumer
consumer attention, and then to generate revenue by selling advertising services to
attention and advertisers.
generate revenue
in different ways Trade Me Property and Homes attract consumer attention and generate
revenue in ways that differentiate them from each other.
Trade Me Property attracts consumer attention by offering a comprehensive
listing of real estate for sale and rent on a user-friendly platform that makes
it easy for consumers to search for available property. Trade Me Property’s
primary way of earning revenue from this consumer interest is by selling
listings.
In doing so, Trade Me competes with print publications such as NZ Herald
and Property Press, New Zealand’s other two main listings platforms
realestate.co.nz and oneroof.co.nz (OneRoof), and with other online
competitors.
Homes has a different approach to attracting an audience and earning
revenue. Homes uses publicly available data to produce property
information and data that it provides to consumers for free, in competition
with a wide range of other providers of property information and data
(including Property Value, My Valocity, and PriceMyProperty). Homes earns
its revenue primarily by selling digital advertising services to real estate
agents and other advertisers who want to target their marketing to Homes’Public Version
audience. Homes does so in competition with a multitude of other digital
advertising providers, including the likes of Google and Facebook.
Overlap between Despite these differences, the acquisition will lead to some limited overlap
Trade Me Property between Trade Me Property and Homes on both the audience and
and Homes is advertising sides of the market.
limited
Trade Me supplements its listings with property data and information
through its Property Insights microsite, which is primarily accessed through
Trade Me Property. On the advertising side, like Homes, Trade Me offers
targeted digital advertising services to advertisers (including real estate
agents).
Homes also displays some real estate listings for sale and rent as an adjunct
to its core digital advertising products. The majority of the listings on Homes
are provided for free. (Homes does not offer private listings.)
Therefore, for the purposes of this application, Trade Me has analysed the
competitive effects of the acquisition in four markets:
● the New Zealand market for the supply to real estate professionals of
advertising for real estate for sale (the real estate advertising market);
● the New Zealand market for the supply to real estate professionals of
advertising for real estate for rent (the rental advertising market);
● the New Zealand market for the supply of digital advertising (the digital
advertising market); and
● the New Zealand market for the supply of property data, information,
and listings to consumers (the audience market).
The acquisition will not harm competition in any of these markets, although
Trade Me submits that the outcome of this application for clearance does
not turn on the precise bounds of the relevant markets. The Commission can
be satisfied that the acquisition would not substantially lessen competition
however the market boundaries are drawn.
Strong constraint Trade Me’s acquisition of Homes will not substantially lessen competition in
from existing the real estate advertising market.
competitors in the
real estate Homes is a relatively minor participant in the market with a revenue share of
advertising market under [CONFIDENTIAL]% however the market is defined. Nor is Homes an
unusually strong or vigorous competitive force whose market share belies its
competitive significance. Indeed, Homes’ listings are provided free to real
estate agencies regardless of whether they subscribe to Homes’ digital
advertising product.
Moreover, Trade Me will continue to face strong constraints from other
existing competitors. Real estate advertising is typically paid for by vendorsPublic Version
in New Zealand. Trade Me Property competes with print media and other
online providers to win a share of a vendor’s marketing budget and will
continue to face strong competition to do so in the future.
While digital advertising is continuing to grow in New Zealand, print media –
such as Property Press and NZ Herald – continues to account for over [Trade
Me CONFIDENTIAL]% of all real estate advertising in New Zealand. This
continued share for print illustrates the competitive force print media
retains and will continue to exert in the future.
In addition to the constraint from print, the three main online participants in
the real estate advertising market – Trade Me Property, realestate.co.nz,
and OneRoof – compete strongly with each other. This online competition is
only likely to grow as other providers such as Facebook and Google continue
to grow and develop their real estate specific offerings.
Indeed, even putting print aside, the constraint imposed by these online
competitors (as well as the potential for entry by others) will be more than
sufficient to prevent any loss of competition from Trade Me’s acquisition of
Homes.
Even if the Commission did not consider these constraints to be sufficient,
the reality is that Homes’ modest market position and the non-exclusive
nature of listings, means that another provider of property information and
data could relatively easily add sufficient real estate listings to its existing
product to replicate Homes’ current position, should a market opportunity
present itself post-acquisition. Such entry would remedy any transitory loss
of competition that could be theorised.
Put simply, removing Homes as an independent participant is unlikely to
change the strong competitive dynamic that exists between print media and
other online providers and between the online providers themselves. Nor
will it affect the ease with which others could enter and expand.
Very limited Homes is an even smaller participant in the rental advertising market than it
overlap in the is in the real estate advertising market with revenues of $[CONFIDENTIAL]
rental advertising and a revenue share of well under [CONFIDENTIAL]%. And, as in the real
market estate advertising market, Homes is not an unusually strong or vigorous
competitive force.
The primary competition in the rental advertising market is between Trade
Me, Facebook – which is a strong and growing competitive constraint in this
market – realestate.co.nz and OneRoof. The removal of Homes as an
independent participant in this market is unlikely to change this competitive
dynamic.Public Version
For these reasons Trade Me’s acquisition of Homes will be unlikely to
substantially lessen competition in the rental advertising market.
Trade Me and Nor is the acquisition likely to substantially lessen competition in the digital
Homes are minor advertising market.
participants in
digital advertising Trade Me and Homes are each relatively small participants in this market.
The major providers of digital advertising in New Zealand are Google and
market
Facebook, who together with a myriad of other providers provide a
multitude of options for advertisers of all types to reach their target
audience.
And, while Trade Me has adopted a digital advertising market consistent
with previous Commission decisions, the outcome would not be different
even if the focus were only on advertising to people with an interest in real
estate. Even in that narrow segment, Google and Facebook would remain as
very strong competitive forces as would, at the very least, other real estate
related websites such as realestate.co.nz, OneRoof, and Property Value.
Faced with this competition, Trade Me submits that there is no plausible
scenario in which advertisers would receive less or pay more for digital
advertising because of the acquisition.
No loss of quality Similarly, Trade Me submits that there is no plausible scenario in which
or innovation in consumers will be disadvantaged because of the acquisition.
the audience
market All real estate related platforms – including Trade Me, realestate.co.nz,
OneRoof, Property Value, and My Valocity – have access to the necessary
information and data to compete and are driven to innovate and improve
their product in a way that increases audience and audience engagement.
An increased audience allows these providers to provide a more valuable
and compelling product to advertisers on the other side of the platform.
This incentive will remain high regardless of whether Homes is an
independent participant in the market or not.
Simply put, Trade Me Property and all other platforms will continue to have
a strong incentive to innovate and improve the product they offer to
consumers to maximise their audience and thereby improve the quality of
the product they can offer to advertisers.
Acquisition will Finally, and for completeness, Trade Me submits that this is not an
not substantially acquisition that will give rise to a substantial lessening of competition via
lessen competition vertical or conglomerate effects.
via vertical or
While Homes and Trade Me have different focuses, the acquisition does not
substantially change the scope of Trade Me’s existing business. That said,Public Version
conglomerate Trade Me believes its acquisition of Homes will improve the product it can
effects offer to both consumers and advertisers, but this improved product is likely
to spur further innovation as other providers seek ways to improve the
quality of their products.
The acquisition will not result in competitors being foreclosed from any of
the relevant markets; nor does it provide Trade Me with a greater ability or
incentive to engage in conduct that prevents or hinders rivals from
competing effectively.
Unlike in other cases where the Commission has considered vertical or
conglomerate effects, while the Homes product is effective, it is not a unique
and unreplicable product that other providers must have in order to
compete in any relevant market. Nor is it expected to become so.
Other providers – including OneRoof, realestate.co.nz, Property Value, Price
My Property, and My Valocity – already offer similar information and data to
that which Homes offers today. That will not change because of the
acquisition. Except for data that individual users choose to provide to the
site, none of the source data that Homes uses to produce its data and
information is exclusive to Homes.
Similarly, there is no exclusivity in relation to listings today. Real estate
agencies list their properties on a range of print and online sites, usually as
selected by vendors. Again, the acquisition will not change this.
So, while Trade Me believes it will have a better product post-acquisition, all
other providers will have the same ability with or without the acquisition to
access all the necessary information, data, and listings needed to compete to
attract an audience.
Trade Me requests For these reasons, Trade Me submits that the Commission can be satisfied
the Commission that Trade Me’s acquisition of up to 100% of the shares or assets of
grants clearance PropertyNZ will not and will not be likely to substantially lessen competition
in any market. Indeed, the acquisition is likely to spur additional competition
and innovation, rather than suppress or undermine it.
Trade Me, therefore, requests that the Commission grant clearance for the
acquisition.Public Version
Confidentiality
1. This application contains information that is confidential to one or more of Trade Me or
Homes. The confidential information is commercially sensitive, and disclosure of it would be
likely to unreasonably prejudice the commercial position of the party providing that
information.
2. Confidential information in this application is contained in bolded square brackets with
highlighting to reflect who the information is confidential to.
2.1 Information that is confidential to the parties as against third parties is highlighted in
yellow (i.e., [CONFIDENTIAL]) and listed in Attachment A.
2.2 Information that is confidential to Trade Me as against all parties is highlighted in
blue (i.e., [Trade Me CONFIDENTIAL]) and listed in Attachment A.
The acquisition and the parties
3. Trade Me Limited (and/or any of its interconnected bodies corporate) (Trade Me) is seeking
clearance to acquire 100% of the shares (or assets) of PropertyNZ Limited. 1 The effect of the
acquisition will be to combine the Trade Me Property and Homes.co.nz websites under
common ownership.
4. The Sale and Purchase Agreement was signed on 11 February 2021. The Agreement is
conditional on several matters, including receipt of clearance from the Commission. The Sale
and Purchase provides that Property NZ’s shareholders will sell, and Trade Me will purchase,
all of the shares in Property NZ. The purchase price is [CONFIDENTIAL]. A copy of the sale
and purchase agreement ([Trade Me CONFIDENTIAL]) are included as Attachment C. The
sale and purchase agreement is confidential. There are no ancillary agreements.
Trade Me Limited – the Applicant
5. Trade Me is an online marketplace and classified advertising platform. In May 2019, Apax
Partners acquired Trade Me and Trade Me was delisted from the NZX and ASX. Apax
Partners is a British private equity firm, headquartered in London, England.
6. Most relevant to this application for clearance, Trade Me operates Trade Me Property. Trade
Me Property was launched in 2005 and is a searchable online property classifieds platform,
which allows consumers to search for properties throughout New Zealand. Trade Me
Property has two main parts: real estate for sale, and real estate for rent (including
Flatmates wanted).
Real estate for sale
7. To attract consumers to its site, Trade Me Property needs listings and an attractive and
usable product for consumers. Over the 12 months to October 2020, Trade Me Property had,
on average, [Trade Me CONFIDENTIAL] new properties listed for sale each month. In the 12
months to August 2020, Trade Me Property attracted [CONFIDENTIAL] unique viewers per
1 The transaction only relates to New Zealand and, therefore, no other competition agencies have been notified.Public Version
month, who viewed its listings just over [CONFIDENTIAL] million times per month on
average.
8. Trade Me Property sells a range of different for-sale listing products to real estate agents
(ultimately vendors) and directly to vendors (for private sales), ranging from a base listing to
a feature listing, super feature listing, and premium listing. The difference between these
products is in the design and look of the listing, the size of the image and where in the
search results a listing appears. Trade Me Property also offers a boost product, for
properties which have not yet sold, which elevates older listings back to the top of search
results.
9. In the 2020 Financial Year, Trade Me Property earned $[Trade Me CONFIDENTIAL] in listings
revenue. 2 [Trade Me CONFIDENTIAL]% of that revenue was from sales via real estate
professionals, with the remaining [Trade Me CONFIDENTIAL]% being private sales. Trade
Me’s top five customers ([Trade Me CONFIDENTIAL]) account for [Trade Me
CONFIDENTIAL]% of its revenue, and [Trade Me CONFIDENTIAL]% of its listings.
10. Relevant to this application, Trade Me also operates the Property Insights microsite as an
adjunct to the main Trade Me Property site. Trade Me launched Property Insights in October
2016.
11. Property Insights provides consumers with property details, historical sales data, estimates
of what a property is likely to sell for, current rateable value (RV) information, rental
estimates, and properties for sale on Trade Me. The estimate of a property’s sales value is
computer-generated using a Trade Me developed algorithm and is based on sales of similar
properties and rateable values. Most of the data used in Property Insights is sourced from
public records from councils across the country.
Real estate for rent
12. The real estate for rent part of Trade Me Property’s business is very similar to the real estate
for sale part of the business. Trade Me is incentivised to win listings and attract an audience
for those listings.
13. Over the 12 months to October 2020, Trade Me Property had, on average, [Trade Me
CONFIDENTIAL] new properties listed for rent each month.
14. As with for sale listings, Trade Me offers a range of different listings ranging from basic
listings to feature, super feature and premium. Also like for sale listings, the difference
between these rental listing products is in the look and design of the listing, the size of the
images and where listings appear in search results.
15. In the 2020 financial year, Trade Me Property earned $[Trade Me CONFIDENTIAL] in rental
listings revenue. 3 [Trade Me CONFIDENTIAL]% of that revenue was from rental listings sold
to real estate professionals, with the remaining [Trade Me CONFIDENTIAL]% being private
rental listings.
16. For completeness, Trade Me also offers a product to help people find flatmates. Homes does
not offer such a service and that service is not considered further as part of this application.
2 Trade Me’s for sale listing revenues for the past three years are: [Trade Me CONFIDENTIAL].
3 Trade Me’s for rent listings revenues for the last three years are: [Trade Me CONFIDENTIAL].Public Version
Contact details
17. The contact details for Trade Me are:
Trade Me
www.trademe.co.nz
Level 5
2 Market Lane
Wellington 6011
Attention: Eleni Psaltis
Head of Legal, Regulatory & Risk
Trade Me
eleni.psaltis@trademe.co.nz
18. Trade Me requests that the Commission sends all correspondence regarding this application
to David Blacktop (david@blacktoplawyers.com).
The Vendors – PropertyNZ Limited
19. PropertyNZ is the company that owns and operates the homes.co.nz website. PropertyNZ is
a privately owned company owned by founders Jamie Kruger (17.52%) and Michael Gibbs
(14.70%), and other shareholders including Spark (22.20%). 4
20. Homes operates a free online property data and information resource for consumers.
Consumers can search for property information by entering a property’s address, suburb, or
city.
21. For each property, Homes provides property details, historical sales data, rateable value (RV)
information, neighbourhood information (e.g., school zones), an estimate of what a property
is likely to sell for, an estimate of what a property is likely to be rented at, partner
information (e.g., estimated home loan repayments), and listings for nearby properties for
sale or rent. Homes attracted an average of [CONFIDENTIAL] unique viewers per month in
the 12 months to August 2020.
22. As Homes makes its information available for free, Homes derives no revenue from the
provision of property information to consumers. Rather, Homes monetises consumer
interest in the homes.co.nz website by providing real estate agents, property related
partners and others with the opportunity to market themselves to consumers who use
Homes. 5
22.1 Examples of this on the Homes’ site are the solar potential estimate, which is
sponsored by Harrisons Energy Solutions, a borrowing calculator powered by Loan
Market, and home inspiration featuring suppliers like Mitre 10 and Resene. Homes
4 Homes’ revenues for the last three financial years are: [CONFIDENTIAL].
5 Trade Me understands that Homes’ top five customers [CONFIDENTIAL].Public Version
earnt $[CONFIDENTIAL] from these types of advertising products in the 2020
financial year, which is approximately [CONFIDENTIAL]% of Homes’ revenues.
22.2 Homes also offers a “Premium Agent” product that allows agents to claim the
houses they have sold on Homes’ website and advertise themselves to people
viewing properties. This costs $99 ex GST per month. 6 As at the end of October 2020,
Homes had [CONFIDENTIAL] agents subscribing to this product. Homes also offers
additional premium agent advertising products (e.g., Suburb Expert). Homes earnt
$[CONFIDENTIAL] in revenue from these agent advertising products in the 2020
financial year, which is approximately [CONFIDENTIAL]% of Homes’ revenues.
22.3 Homes also offers a similar Premium Branch product at a real estate branch level for
$299 ex GST per month.7 Homes introduced this product in early 2018. As at the end
of September 2020, Homes had [CONFIDENTIAL] branches subscribing to this
product.
23. Homes does host some listings for properties for sale or rent. These are provided free
regardless of whether the real estate agencies subscribe to Homes’ advertising product.
Homes does not provide listings for sale or rent to private vendors or lessors and has no
plans to do so.
24. Basic listings for properties for sale on Homes are effectively free.
24.1 Real estate agencies can upload unlimited listings for free via Homes’ branch listings
product. Up until October 2019, Homes priced the branch listings product at $199 ex
GST per month. However, in October 2019, Homes reduced the price to zero. As at
September 2020, Homes had [CONFIDENTIAL] branches subscribe to this product
across both sales and rentals.
24.2 Alternatively, any of the [CONFIDENTIAL] agencies who subscribe to the Premium
Branch product can upload unlimited listings for no additional cost.
25. An individual agent could also, should they wish to, purchase a basic listing for $39 ex GST
per listing. They could do this if the agency they worked for did not subscribe to either the
branch listings or Premium Branch products.
26. Homes does sell feature listings for $69 ex GST. 8
27. In the 12 months to October 2020, Homes had an average of [CONFIDENTIAL] new listings
for sale per month and in the year to 30 March 2020, Homes earnt approximately
[CONFIDENTIAL] from listings.
28. With respect to rentals, Homes sells a basic listing on a subscription basis to real estate
offices or property managers for $199 ex GST per branch per month. 9 As at the end of
September 2020, Homes had [CONFIDENTIAL] branches subscribing to this product
generating $[CONFIDENTIAL] in revenue. In the 12 months to September 2020, Homes had
an average of [CONFIDENTIAL] new rental listings per month.
6 See https://get.Homes.co.nz/PremiumAgent.
7 See https://get.Homes.co.nz/PremiumBranch.
8 See https://get.Homes.co.nz/Listings and https://get.Homes.co.nz/FeaturedListing
9 See https://get.Homes.co.nz/PropertyManagerPublic Version
29. Finally, PropertyNZ also provides property data and valuations to commercial customers
such as Summerset, Partners Life, and AA Insurance. (Trade Me does not offer a similar
product and has no plans to do so.)
30. PropertyNZ’s contact details are:
47 The Esplanade,
Hutt Central
Lower Hutt, 5012
Attention: Jamie Kruger, CEO
jamie.kruger@homes.co.nz
31. PropertyNZ requests that the Commission sends all correspondence regarding this
application to Neil Anderson (neil@neilandco.nz).
Rationale for the acquisition
Trade Me’s rationale
32. While Trade Me Property and Homes are both real estate related portals, they attract
consumer attention and generate revenue in ways that differentiate them from each other.
Indeed, it is the complementary nature of Trade Me Property and Homes that drives Trade
Me’s rationale for the acquisition. [Trade Me CONFIDENTIAL].
33. Trade Me Property’s core business is to act as a property listings platform and sell listings to
real estate professionals and private vendors.
34. Although Trade Me Property does provide property data and information (via its Property
Insights microsite), listings are what Trade Me Property is known for and what consumers
visit Trade Me for. Moreover, the current Property Insights experience is [Trade Me
CONFIDENTIAL] and has not had any significant investment or development since it was first
launched. Today, Property Insights is [Trade Me CONFIDENTIAL].
35. This is partly because Homes is focussed primarily on providing property data and
information to consumers, in competition with providers like Property Value, Price My
Property, and My Valocity. Just as Trade Me Property offers property data and information
as an adjunct to its main listings business, Homes does the reverse; Homes offers listings as
an adjunct to its property data and information product.
36. One example of the differences between the two sites is the way their search functions
work. Trade Me Property allows a person to easily search for properties for sale or rent.
Consumers can focus their search on location, price, features (e.g., bedrooms, bathrooms),
property type and latest listings for example. Homes’ search function is focussed on enabling
consumers to search for a specific address to obtain information relating to that property.
37. This difference in what Trade Me Property and Homes are known for drives differences in
audience. Homes’ audience, for example, is skewed towards consumers in the research and
early stages of the consumer property buying cycle. Trade Me Property’s audience is skewed
more towards the later stages of the buying cycle when consumers are actively looking for
and comparing properties.Public Version
38. To put this in context, Trade Me estimates that approximately [Trade Me CONFIDENTIAL]. In
particular, Trade Me believes property owners who may not be active in the typical buyer
stages of the property lifecycle, represent a significant potential audience. Engaging with this
audience presents a range of opportunities, including:
38.1 [Trade Me CONFIDENTIAL];
38.2 [Trade Me CONFIDENTIAL];
38.3 [Trade Me CONFIDENTIAL];
38.4 keeping Trade Me Property top of mind when looking to buy/sell;
38.5 [Trade Me CONFIDENTIAL]; and
38.6 [Trade Me CONFIDENTIAL].
39. It is these differences in audience and focus and the potential benefits to Trade Me that
drive Trade Me’s rationale for acquiring Homes. In short, Trade Me views Homes as
supplementing its Trade Me Property offer in four ways.
39.1 First, the acquisition provides Trade Me with the opportunity to show Trade Me’s
property listings to Homes’ unique (from Trade Me Property) audience of [Trade Me
CONFIDENTIAL].
39.2 Second, Homes has established a position selling digital advertising services to real
estate professionals and other advertisers wishing to target the Homes audience.
This is not an area where Trade Me has traditionally focussed its attention, and
therefore the acquisition provides an immediate revenue upside for Trade Me.
Moreover, the acquisition case and the price paid depends on Trade Me continuing
to grow this part of Homes’ business.
39.3 Third, Homes allows users to register, claim their property, and update the
information about the property. Trade Me will gain this data which, when combined
with Trade Me’s existing data will enable Trade Me to offer advertisers with more
targeted and engaging marketing opportunities to a wider set of viewers.
39.4 Fourth, the acquisition will result in [Trade Me CONFIDENTIAL] – that will allow
Trade Me to convert Homes from a negative EBITDA business to a positive one and
increase Trade Me’s enterprise value. In short, Trade Me believes that Homes is
more valuable in Trade Me’s hands than in the hands of the current shareholders.
But this assessment relies on Trade Me continuing to invest in and grow Homes.
40. Absent the acquisition, Trade Me would explore developing its Property Insights microsite
further and may be able to achieve some of the benefits of the acquisition highlighted
above. However, given the current Property Insights user experience, internal resource
constraints, and Trade Me’s other development priorities, Trade Me believes the acquisition
provides a faster and lower risk way to achieve the benefits described above, while also
allowing Trade Me to focus its limited development resources on more important priorities.
41. During the period from July 2015 to October 2016, Trade Me and Homes had a commercial
relationship that involved a Commercial Services Agreement and Trade Me owning a 15.7%
stake in Homes. The Commercial Services Agreement provided Trade Me with access toPublic Version
Homes’ datasets in exchange for Trade Me providing referral traffic from Trade Me Property
to Homes. From Trade Me’s perspective, the arrangements and its shareholding in Homes
were part of a strategic push to provide Kiwis with free and easy access to the property data
that had become available for free around that time.
42. Trade Me and Homes agreed to end their commercial relationship in October 2016; the
parties terminated the Commercial Services Agreement and Trade Me sold its shares back to
Homes. The reason why the commercial relationship ended was due to differences of
opinion between Trade Me and Homes about what the relationship between the parties
entailed and the value it was delivering (and expected to deliver) to each party, and Trade
Me’s decision (as a major shareholder) not to participate in a Homes capital raise.
Ultimately, the parties concluded that it was in their best interests for Trade Me to exit its
shareholding and for the parties to agree to terminate their Commercial Services
Agreement.
Homes’ rationale
43. Trade Me understands that Homes considers that Trade Me’s ownership will provide Homes
with the opportunity to market the site to a wider audience, while also enabling Homes to
develop a wider and deeper property data set that will enhance the experience of Homes
users.
44. Absent the acquisition, Trade Me understands that Homes will continue its focus on
engaging the homeowner, widening its property data set, and offering additional digital
advertising services to that audience, albeit without being able to access Trade Me’s
datasets and audience.
Relevant markets
45. As described above, Trade Me and Homes each operate real estate related websites. Access
is free for consumers, and Trade Me and Homes each earn revenue by (to a greater or lesser
extent):
45.1 providing property advertising (listings) to real estate professionals (ultimately for
vendors) - albeit that most of Homes’ listings are provided for free - and property
management companies (ultimately for lessors) (Homes does not sell for sale or
rental listings to private sellers); and
45.2 selling digital advertising services to real estate professionals and other advertisers. 10
46. As the Commission has previously acknowledged, online platforms such as Trade Me and
Homes are two-sided markets. They bring together an audience on one side of the market
with advertisers on the other side of the market. The interrelationship between the
audience and advertiser sides of the market can create feedback loops that impose
constraints on the operator of the platform.
10 As described above, Homes.co.nz also offers a commercial home valuation product to commercial customers.
The Commission has previously defined a national market for the supply of property information products to
corporate and government customers. Re PropertyIQ New Zealand Limited and Terralink International Limited
[2013] NZCC 22. Trade Me does not offer a similar commercial valuation product and has no plans to do so. Given
this lack of overlap, that market is not considered further in this application.Public Version
47. However, the Commission’s consistent position has been to define markets on each side of a
platform and then to consider any cross-platform feedback loops in its competition
analysis. 11 Without offering any view on whether that is a correct approach or not, Trade Me
has adopted the Commission’s approach in defining markets in this application.
48. Therefore, Trade Me has adopted the following markets in this application:
48.1 the New Zealand market for the supply to real estate professionals of advertising for
real estate for sale (the real estate advertising market);
48.2 the New Zealand market for the supply to real estate professionals of advertising for
real estate for rent (the rental advertising market);
48.3 the New Zealand market for the supply of digital advertising (the digital advertising
market); and
48.4 the New Zealand market for the supply of property data, information, and listings to
consumers (the audience market).
The real estate advertising market
49. In Motorcentral, Trade Me submitted that there was a national market for the supply of
motor vehicle advertising to motor vehicle dealers. This encompassed digital and print
advertising, and all types of digital advertising (classified, display, and search).
50. The Commission took a narrower approach and adopted a market for “the supply of online
motor vehicle classified advertising to dealers”. 12 The Commission correctly recognised that
it must consider any other sources of constraint from outside the market in its competition
analysis. 13
51. Trade Me remains of the view that online classified advertising is constrained by print
advertising and other digital advertising. This is especially so for real estate.
52. Trade Me Property and other real estate advertising providers sell real estate advertising to
real estate agents. For the most part, real estate agents pass those costs onto vendors.
Therefore, while Trade Me’s contractual relationship is with real estate agents, for the most
part, real estate advertising is chosen and paid for by vendors on the recommendation of
real estate agents.
53. When a vendor decides to sell their home, they have a range of advertising options to
choose from and allocate their budget towards. This includes online listings services like
Trade Me (and competing sites), but also print advertising like Property Press, newspaper’s
homes sections, and real estate agents’ own websites (for which there is typically no
charge).
11 See Trade Me Limited and Limelight Software Limited [2018] NZCC 1 (Motorcentral), NZME Limited and Fairfax
New Zealand Limited [2017] NZCC 8 (NZME/Stuff) at [201] for example.
12 Motorcentral at [84] and [120].
13 Brambles New Zealand Ltd v Commerce Commission (2003) TCLR 868 (HC), at [34]-[39] and [157]-[159].Public Version
54. Indeed, of the $[CONFIDENTIAL] million per year spent on real estate advertising,
$[CONFIDENTIAL]million was spent on print advertising ([CONFIDENTIAL]%), with
$[CONFIDENTIAL] million spent on digital advertising ([CONFIDENTIAL]%). 14
55. Vendors are faced with a choice about where to invest their advertising budget, and they
allocate that budget according to the value they apprehend different methods deliver. If all
online listings were to increase by a ssnip, vendors would divert their advertising spending to
print and other media (e.g., display advertising). For that reason, Trade Me submits that the
correct market is the market for the supply of real estate advertising to real estate
professionals.
56. Trade Me acknowledges that this market definition is wider than the analogous market the
Commission adopted in Motorcentral and the markets some overseas regulators have
adopted based on the specific facts in those jurisdictions. 15 However, Trade Me submits this
is justified based on the realities of the New Zealand real estate market.
57. That said, Trade Me submits that the outcome of this application for clearance does not turn
on whether print and online real estate advertising are in the same market. Put another way,
the Commission can be satisfied that the acquisition would not substantially lessen
competition even in a narrow online only market, due to the strong competitors present in
that market.
58. Finally, Trade Me submits that the market is national notwithstanding that Trade Me has
four different pricing zones for its feature listings products. 16 These pricing zones do not
reflect differences in the competitive options available to consumers in different areas of
New Zealand. The same products are available to consumers throughout New Zealand as
OneRoof, NZME, and RealEstate.co.nz all operate nationally. Rather, the zones largely reflect
the value of the properties in the zone and the resulting value consumers see in the Trade
Me feature listings products. Likewise, Homes operates nationally. In any event, Trade Me
submits that the outcome of this application for clearance does not turn on whether the
market is national or regional, as Trade Me will continue to face vigorous competition in all
areas of New Zealand.
The rental advertising market
59. The rental advertising market is very similar to the real estate for sale advertising market,
but there are two major distinctions.
14 Trade Me analysis based on REINZ data, marketing schedules and desktop research.
15 The ACCC in Fairfax Media / All Homes Pty Limited indicated it thought it likely there were separate print and
digital markets for the supply of real estate classified advertising services in the ACT, but did not form a
concluded view; the OFT (as it then was) in The Digital Property Group Limited/Zoopla Limited, defined a market
for online property advertising through property portals; and the French Competition Authority has considered
print and digital to be in different markets, (Decision n° 18-DCC-18 of 1 February 2018 relating to the acquisition
of sole control of the company Concept Multimedia by the Axel Springer Group).
16 Zone 1: Auckland.
Zone 2: Bay of Plenty (2 districts), Canterbury (3 districts), Nelson / Tasman (3 districts), Otago (1 district),
Waikato (6 districts) and Wellington (5 districts).
Zone 3: Bay of Plenty (3 districts), Canterbury (5 districts), Manawatu / Wanganui (1 district), Northland (3
districts), Taranaki (3 districts), Waikato (4 districts), Wellington (3 districts) & West Coast (3 districts).
Zone 4: Bay of Plenty (1 districts), Canterbury (1 districts), Gisborne (1 district), Hawkes Bay (4 districts),
Manawatu / Wanganui (6 districts), Otago (4 districts) & Southland (3 districts).Public Version
60. The first is that the rental advertising market is predominantly an online market. While there
may be some constraint from print media, print is not the strong constraint in the rental
market that it is in the for-sale market.
61. Second, the customer set for rentals is much more diffuse. Trade Me estimates that nearly
[CONFIDENTIAL]% of real estate sales in New Zealand are completed via a real estate
agent. 17 And while vendors ultimately pay for real estate advertising, the immediate
customer for platforms like Trade Me are the real estate agents. As described above, for
Trade Me, the top five agencies in New Zealand account for [Trade Me CONFIDENTIAL]% of
its revenue.
62. Rentals are different with Trade Me estimating that only around [CONFIDENTIAL]% of
rentals are transacted through property professionals. 18 Moreover, the property
professionals undertaking rentals are a materially more fragmented group than the real
estate agencies involved in the for sale market.
63. Given these differences, Trade Me has defined a separate rental advertising market and
considers the competitive effects separately below.
The digital advertising market
64. Trade Me submits that it is useful to consider a digital advertising market separate from the
real estate for sale (classified) advertising market above. This market encompasses all other
types of general digital advertising including search and display and the types of marketing
partnerships Homes has developed, but excludes classified listings of the type included in
the real estate advertising market defined above. There is some overlap between Homes
and Trade Me in this market, but both are relatively small participants.
65. The Commission most recently considered the scope of the digital advertising market in
NZME/Stuff. In that case, which involved the proposed merger of the two largest online
news sites in New Zealand, the Commission defined a market for the supply of digital
advertising in New Zealand. 19
66. In doing so, the Commission recognised that:
Digital or online advertising is a broad category that encompasses all advertising delivered
over the Internet, via a consumer’s computer, mobile phone or tablet. The advertising can be
audio, video, image or text based.
67. And while the Commission considered that there would be a range of sub-categories that
provide advertisers with different outcomes, the Commission did not consider that separate
types of advertising warranted separate markets.
68. Nor did the Commission consider that there was a separate customer market for advertisers
who wanted to be associated with news sites (i.e., a specific customer market). This was
even though the Commission declined the merger on the basis that the merger would
substantially lessen competition in the reader/audience markets.
17 This is based on the fact that Trade Me’s for sale listings volumes, [Trade Me CONFIDENTIAL]% comes from
agents, and [Trade Me CONFIDENTIAL]% direct.
18 This is based on the fact that Trade Me’s for rent listings volumes, [Trade Me CONFIDENTIAL]% comes from
agents, and [Trade Me CONFIDENTIAL]% comes direct.
19 NZME/Stuff at [245].Public Version
69. Similarly, in this case, while Trade Me Property and Homes are property related websites
and therefore attract audiences with an interest in property, that does not mean that there
is a separate customer market for the sale of digital advertising to advertisers wanting to
attract people interested in real estate. Rather, Trade Me submits that the Commission
should adopt the approach it took in NZME/Stuff and define a market for the supply of
digital advertising in New Zealand.
70. However, again, the precise scope of the market is unlikely to be determinative of this
clearance application. Even if the Commission adopted a narrowly defined market focused
on the sale of digital advertising to persons with an interest in real estate, that market would
still include all property related websites, the property sections of all news media websites,
Google, and Facebook.
The audience market
71. Trade Me has also adopted a New Zealand market for the supply of property data,
information, and listings to consumers (the audience market).
72. This market could, in theory, be separated further into property data and information on the
one hand, and property listings on the other. However, Trade Me’s view is that the precise
scope of the audience market is unlikely to be material to the Commission’s assessment.
73. Property data, information, and listings are provided for free to consumers in New Zealand
by a range of providers. Therefore, any competitive harm in this market would arise through
a loss of quality or innovation. This is unlikely. All providers are incentivised to compete and
innovate to attract a larger audience (to maximise advertising revenue) and that will not
change following the acquisition.
74. In Motorcentral, the Commission took the pragmatic approach of focussing its attention on
the advertising side of the market:
The competition effects of the acquisition in the advertising market could also manifest in
the audience market (for example, a lessening of competition could result in reductions in
the quality of listings platforms, harming potential vehicle buyers). However, on the evidence
before us, we do not consider that the competition effects in the audience market would be
more significant than the competition effects in the advertising market. Accordingly, our
analysis focuses on the competitive impact of the acquisition in the advertising market.
75. Trade Me submits that the Commission may consider adopting a similar approach in this
case and direct its focus to the advertising side of the market. However, for completeness,
Trade Me has addressed the audience market further below.
None of the relevant markets are prone to coordinated effects
76. As an initial point, Trade Me submits that none of the relevant markets are prone to
coordinated effects. None of the features identified by the Commission in the Merger
Guidelines as market features that might facilitate coordination are present in any of these
markets. Moreover, Trade Me submits that the Commission can be satisfied that removing
Homes as an independent participant will not change the market in a way that would make
coordination more likely, more complete, or more sustainable. 20
20 Mergers and Acquisitions Guidelines at [3.86].Public Version
77. Therefore, this application does not address coordinated effects in each relevant market
below. However, Trade Me can provide further information if that would be useful to the
Commission.
Why the acquisition will not substantially lessen competition in the
real estate advertising market
Summary
78. Trade Me is, and will continue to be, constrained by the numerous competitors who
compete in the real estate advertising market. These range from print media providers like
NZ Herald and Property Press, to other online providers like realestate.co.nz and OneRoof.
79. By contrast, Homes is a relatively small participant in this market and is not an unusually
disruptive competitive force. This is illustrated by the fact that in October 2019 Homes
effectively made basic listings free. Despite that move, Homes’ listings have not increased
significantly. Put simply, Homes’ removal as an independent participant is unlikely to change
the underlying strong competitive dynamic that exists. The market will continue to be
characterised by strong price competition and innovation.
Continuing strong constraint from print media
80. Print media is a significant supplier of advertising of real estate for sale in New Zealand. As
described above, the real estate advertising market is worth an estimated $[CONFIDENTIAL]
million per year. $[CONFIDENTIAL] million was spent on print advertising
([CONFIDENTIAL]%), with $[CONFIDENTIAL] million spent on digital advertising
([CONFIDENTIAL]%). 21
81. The three major print media providers in New Zealand are Property Press, NZ Herald, and
Stuff.
Property Press
82. Property Press is a free dedicated real estate magazine, published every week in 10 different
regions around New Zealand. 22 Trade Me understands that Property Press is owned by six
different joint ventures throughout New Zealand. It was previously published and distributed
by Bauer who owned approximately 50% of each joint venture but sold these interests to
Mercury Capital in mid-2020. The remaining 50% of each joint venture is owned by real
estate agents in the particular region of New Zealand where the Property Press is published.
83. Trade Me estimates that Property Press accounts for [CONFIDENTIAL]% of all real estate
advertising revenue in New Zealand, with an average revenue per campaign of
$[CONFIDENTIAL]. 23
21 Trade Me analysis based on REINZ data, marketing schedules and desktop research.
22 Central Auckland, North Shore, Eastern Auckland, Franklin, Taranaki, Nelson, Otago, Taupo, Canterbury, Lake
District.
23 Trade Me Property research.Public Version
(NZME) NZ Herald
84. The NZME business is well known to the Commission. As described recently by the
Commission, NZME is a New Zealand media and entertainment business that offers radio
broadcasting (Newstalk ZB, ZM, Radio Hauraki, etc), print publications (The New Zealand
Herald, Herald on Sunday, Weekend Herald, etc), digital publications (such as
www.nzherald.co.nz), and e-commerce services.
85. NZME provides print real estate advertising through its newspapers, most particularly the NZ
Herald and Weekend Herald. NZME also owns 80% of OneRoof, which is discussed further
below.
86. NZME forecast property revenues of $35 million for the 2020 calendar year, 24 indicating that
NZME enjoys a [CONFIDENTIAL]% share of the real estate advertising market, which
included $22 million in print revenue. 25
Stuff
87. The Stuff business is also well known to the Commission. Stuff operates a variety of print
publications in New Zealand, including The Dominion Post, The Press, and The Sunday Star
Times, and other regional newspapers. These print publications provide property advertising
in a similar way to the NZ Herald.
88. Trade Me estimates that Stuff’s revenue share of the real estate advertising market is
between 5% and 10% considering Stuff’s share of suburban newspaper revenues.
89. Stuff also owns Neighbourly, which is a private neighbourhood website that allows
neighbours to talk and share online as is discussed further below. It also has a property
section that allows users to search for properties for sale.
Continuing strong constraint from other online portals
90. In addition to the strong continued constraint from print media, Trade Me will continue to
be constrained by its rival online providers, most notably, realestate.co.nz and OneRoof.
These providers already have strong brands and an established position in the market and
there is nothing to prevent them from expanding their presence if a market opportunity
presents itself. Indeed, the constraint from these online providers will be sufficient in and of
itself to prevent a substantial lessening of competition arising from Trade Me’s acquisition of
Homes.
91. While share in digital markets is very difficult to assess, the table below provides Trade Me
estimates of listings per month, unique audience for each site 26, and share of advertising
expenditure for some market players. There is nothing to prevent any of these competitors
from continuing to expand their offering.
24 NZME 2019 Full Year Results presentation, page 27 (https://www.nzme.co.nz/media/1490/nzme-2019-full-year-
results-presentation_final.pdf)
25 NZME New Zealand Media and Entertainment Investor Day 16 November 2020, page 104.
26 Unique audience is the number of people who visited a site in a month. For that reason, a person can be a unique
viewer to any number of sites.Public Version
New listings Unique Revenue Share of print Share of online
per month 27 audience per and online spend
month 28 spend
Trade [CONFIDENTIAL] [CONFIDENTIAL] [Trade Me [Trade Me [Trade Me
Me CONFIDENTIAL] CONFIDENTIAL] CONFIDENTIAL]
Homes [CONFIDENTIAL] [CONFIDENTIAL] [CONFIDENTIAL] [CONFIDENTIAL] [CONFIDENTIAL]
([Trade Me
CONFIDENTIAL]
of which is
unique from
Trade Me
Property)
Real [CONFIDENTIAL] [CONFIDENTIAL] Unknown to
Estate Trade Me
OneRoof [CONFIDENTIAL] [CONFIDENTIAL] $4m 29
Combined Combined
~ 12.5% ~ 33.5%
Faceboo [CONFIDENTIAL] Unknown to Unknown to
k Trade Me Trade Me
Hougard Unknown to Unknown to Unknown to
en Trade Me Trade Me Trade Me
92. All these providers offer a range of products in competition with Trade Me’s products.
27 Average for the 12 months to October 2020
28 Average for the 12 months to October 2020.
29 NZME’s New Zealand Media and Entertainment Investor Day 16 November 2020, page 128.Public Version
Trade Me Product Basic 30 Feature 31 Super Feature 32 Premium 33 Boosted 34
Realestate.co.nz Yes Yes Showcase No Refresh
OneRoof Yes Yes Yes No Refresh
Can only be bought in packages
Hougarden Yes Yes Showcase No No
Can only be bought in packages
Homes Yes Yes No No No
Facebook Yes No No No No
Neighbourly Yes Showcase No No No
Plus
Google Yes No No No No
realestate.co.nz
93. Realestate.co.nz is an online real property listings portal owned by the real estate industry.
Realestate.co.nz is owned in equal shares by Property Page (NZ) Limited and Real Estate
Institute of New Zealand (REINZ). REINZ is a membership organisation representing 14,000
real estate agents throughout New Zealand. Property Page (NZ) Limited is owned by Ray
White, LJ Hooker, Barfoot & Thompson, Harcourts, and Bayleys.
94. Realestate.co.nz claims on its website that it is used by over 1,300 real estate offices in New
Zealand, and that it features 97% of all listings currently marketed in New Zealand. Given its
ownership, realestate.co.nz has close relationships with the real estate industry.
95. Realestate.co.nz offers standard listings, feature listings (similar to Trade Me Property’s
feature product), showcase listings (similar to Trade Me Property’s super feature product),
and refresh (similar to Trade Me Property’s boost product).
30 Trade Me’s most basic listing product. A Basic listing is required to activate all other listing products, upgrades,
and marketing packages.
31 Feature listings are larger than Basic, have a distinctive yellow background and appear higher in search results
than Basic. Search results also include additional details about the property compared to Basic listings.
32 Super Feature appears at the top of search results, displays 3 photos in search results (instead of 1), is larger than
a Feature listing and lasts for 7 days. It includes a Feature Listing and reverts to that after the 7-day period.
33 Premium listings are Trade Me’s largest listing. It appears below Super Feature listings in search results.
34 Boost elevates listings to the top of search results, within the relevant product tier.Public Version
96. Trade Me estimates that realestate.co.nz had an average of [CONFIDENTIAL] listings per
month in the 12 months to October 2020, and [CONFIDENTIAL] unique viewers per month.
97. Realestate’s audience and inventory have stalled recently as new digital offerings such as
OneRoof have entered the market. However, realestate.co.nz appears to be responding to
this increased competition. Realestate.co.nz has recently relaunched its consumer facing
website, and in 2018 it added agent sales data and District Valuation Roll (DVR) data.
OneRoof
98. OneRoof is an online property portal and is a relatively new entrant into the market.
OneRoof provides listings and property information and data for free to consumers. NZME
launched OneRoof in 2018. Today, OneRoof is owned 80% by NZME and 20% by
HouGarden.com Limited, a New Zealand property portal targeting the Chinese-speaking
market.
99. OneRoof has grown from a zero base to be a strong competitor in the market. In its latest
interim report NZME said its “[s]trategic priority is creating New Zealand’s leading real estate
platform”. 35
100. OneRoof has grown its listings and audience by successfully leveraging its diversified media
businesses to advertise OneRoof across all NZME channels and using its established sales
team to sell across platforms.
101. Trade Me estimates that OneRoof had an average of [CONFIDENTIAL] listings per month in
the 12 months to October 2020, and [CONFIDENTIAL] unique viewers per month.
102. In its 2020 Investor Presentation, NZME reported forecast revenue for OneRoof of $19
million with digital revenue of $4 million. 36 In its 2019 financial results, NZME reported that
OneRoof had earned revenues of $2.8 million. In the same period, NZME reported property
revenue (both print and OneRoof) of $40 million. Trade Me understands that NZME sells its
print and online products as a bundle, and while Trade Me has no visibility of how NZME
allocates revenue between the two, Trade Me expects that the digital figures might
understate digital revenues.
Facebook
103. Facebook Marketplace entered the real estate advertising market in April 2019. Facebook
marketplace is a searchable online classified advertising platform. Since April 2019, Facebook
has offered real estate agents the ability to list their properties for sale on their Facebook
page and target potential buyers via that channel.
104. However, Facebook’s search function for consumers is limited to price at this stage, i.e.,
consumers cannot search on property type, number of bedrooms etc. In contrast, Facebook
has built a more advanced search function for rental properties and grown its presence to a
significant level in a quick period of time. It would be relatively quick and straightforward for
Facebook to build a better search function for properties for sale, and Trade Me expects
Facebook to do this.
35 NZME 2020 Interim Results Presentation, page 23.
36 NZME’s New Zealand Media and Entertainment Investor Day 16 November 2020, page 128.You can also read
